An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the bank of Japan, and the
U.S. federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.

The process of taking the balances from the bank statement and the general ledger and making adjustments so that they agree.

Bank reconciliation

A comparison between the cash position recorded on a company’s
books and the position noted on the records of its bank, usually resulting in some
changes to the book balance to account for transactions that are recorded on thebank’s records but not the company’s.

Bank wire

A computer message system linking major banks. It is used not for effecting payments, but as a
mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of
funds into that bank's account.

Banker's acceptance

A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These
instruments have been a popular investment for money market funds. They are commonly used in
international transactions.

Bankers Acceptances

A bill of exchange, or draft, drawn by the borrower for payment on a specified date, and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a postdated certified cheque.

Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.

bankruptcy

The reorganization or liquidation of a firm that cannot pay its debts.

Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.

Bridge financing

Interim financing of one sort or another used to solidify a position until more permanent financing is arranged.

Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

CASH FLOWS FROM FINANCING ACTIVITIES

A section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.

Central Bank

A public agency responsible for regulating and controlling an economy's monetary and financial institutions. It is the sole money-issuing authority.

Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.

Commercial Bank

concentration banking

System whereby customers make payments to a regional collection center which transfers funds to
a principal bank.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Cost of lease financing

A lease's internal rate of return.

Debt Financing

Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.

Debtor-in-possession financing

New debt obtained by a firm during the Chapter 11 bankruptcy process.

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Eurobank

Export Financing

A range of financing products (loans. guarantees, letters of credit, insurance etc.) in support of a variety of activities which help Canadian firms expand into new export markets.

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

Federal agency securities

Securities issued by corporations and agencies created by the U.S. government,
such as the federal Home Loan bank Board and Ginnie Mae.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

Federal Employer Identification Number

A unique identification number issued
by the federal government used for payroll purposes to identify the company
when it deals with the Internal Revenue Service.

Federal funds

Non-interest bearing deposits held in reserve for depository institutions at their district federal
Reserve bank. Also, excess reserves lent by banks to each other.

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.

Federal funds rate

This is the interest rate that banks with excess reserves at a federal Reserve district bank
charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction
of U.S. interest rates.

Federal Funds Rate

The interest rate at which banks lend deposits at the federal Reserve to one another overnight.

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The federal Home Loan banks play a role analogous to that played by the federal Reserve banks vis-à-vis
member commercial banks.

Federal Insurance Contributions Act of 1935 (FICA)

A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.

Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.

Federal Reserve Banks

The twelve district banks in the federal Reserve System.

Federal Reserve Board

Board of Governors of the federal Reserve System.

Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the federal
Reserve Board located in Washington, D.C. The system includes 12 federal Reserve banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise federal Reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.

Federal Reserve System

The central banking authority responsible for monetary policy in the United States.

Federal Reserve (the Fed)

The central bank in the United States, responsible for setting interest rates.

Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

Federally related institutions

Arms of the federal government that are exempt from SEC registration and
whose securities are backed by the full faith and credit of the U.S. government (with the exception of the
Tennessee Valley Authority).

financing activities

One of the three classes of cash flows reported in the
statement of cash flows. This class includes borrowing money and paying
debt, raising money from shareowners and the return of money to
them, and dividends paid from profit.

financing decision

a judgment made regarding the method
of raising funds that will be used to make acquisitions; it
is based on an entity’s ability to issue and service debt and
equity securities

financing decision

Decision as to how to raise the money to pay for investments in real assets.

Financing decisions

Decisions concerning the liabilities and stockholders' equity side of the firm's balance
sheet, such as the decision to issue bonds.

Financing Instruments

This is a generic term that refers to the many different forms of financing a business may use. For example - loans, shares, and bonds are all considered financing instruments.

Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.

Fractional Reserve Banking

A banking system in which banks hold only a fraction of their outstanding deposits in cash or on deposit with the central bank.

Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.

International Bank for Reconstruction and Development - IBRD or World Bank

International bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
economic priority.

International Banking Facility (IBF)

International banking Facility. A branch that an American bank
establishes in the United States to do Eurocurrency business.

Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.

Investment Banker

Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Merchant bank

A British term for a bank that specializes not in lending out its own funds, but in providing
various financial services such as accepting bills arising out of trade, underwriting new issues, and providing
advice on acquisitions, mergers, foreign exchange, portfolio management, etc.

Merchant Bank

A financial institution that engages in investment banking functions, such as advising clients in mergers and acquisitions, underwriting securities and taking debt or equity positions.

Money center banks

banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.

Multi-option financing facility

A syndicated confirmed credit line with attached options.

Net financing cost

Also called the cost of carry or, simply, carry, the difference between the cost of financing
the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than
the financing cost; negative carry means that the financing cost exceeds the yield earned.

Off-balance-sheet financing

financing that is not shown as a liability in a company's balance sheet.

PIBOR (Paris Interbank Offer Rate)

The deposit rate on interbank transactions in the Eurocurrency market
quoted in Paris.

Planned financing program

Program of short-term and long-term financing as outlined in the corporate
financial plan.

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.

Project Financing

Debt finance, usually non-recourse, provided by financial institutions for the development and construction of a new project.

Refinancing (Credit Insurance)

Extending the maturity date or increasing the amount of existing debt or both. Also, revising a payment schedule, usually to reduce the monthly payments and often to modify interest charges.

Seed Financing/Capital

Generally, refers to the first contribution of capital toward the financing requirements of a start-up business.

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.

Threshold for refinancing

The point when the WAC of an MBS is at a level to induce homeowners to
prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the WAC of the
MBS is 2% or more above currently available mortgage rates.

Wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights
released to the buyer.

World Bank

A multilateral development finance agency created by the 1944 Bretton Woods, New
Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are
guaranteed by the recipient country. See: International bank for Reconstruction and Development.

World Bank

The International bank for Reconstruction and Development, an international organization that provides long-term loans to developing countries to improve their infrastructure.